Automotive industry is one of the largest sector of an economy. It is the driver of overall economic growth due to its strong forward and backward linkages with several key segments of the country. The automotive industry comprises of two sub-sectors, namely, the automobile and the auto components sector. In India, the automotive industry is well-developed and provides a sound transportation system by producing a wide variety of vehicles such as passenger cars; light, medium and heavy commercial vehicles; multi-utility vehicles; two wheelers; three wheelers; tractors; etc.
The industry has been showing impressive growth since the delicensing and opening up of the sector in 1991. The progressive liberalisation measures have helped the industry in restructuring, absorbing newer technologies as well as aligning itself to the global developments. This has significantly increased the sector's contribution in the overall growth of the country from 2.77% of GDP in 1992-93 to 5% in 2005-06. Also, the growth rate of the sector has increased from 15.06% in 2005-06 to 16.07% in 2006-07 (upto April- November 2006).
Today, the automotive industry of India has made its mark worldwide, making India the world's second largest manufacturer of two wheelers; fifth largest manufacturer of commercial vehicles and fourth largest passenger car market in Asia. It also manufactures the largest number of tractors in the world.
The Department of Heavy Industry (DHI), in the Ministry of Heavy Industries and Public Enterprises, is the nodal authority in India for promoting the development and growth of the automotive sector. The department is also concerned with the development of the heavy engineering industry, machine tool industry, heavy electrical industry, industrial machinery, etc.
In order to attract investments (both domestic and foreign) into the sector, the department makes several policy announcements (including incentives) from time to time. The major being , the 'Auto Policy' of 2002, which aims to promote integrated, phased, enduring and self-sustained growth of the Indian automotive industry as well as double its contributions to the economy by 2010. Its objectives are to:-
- Exalt the sector as a lever of industrial growth and employment;
- Emerge as a global source for auto components;
- Establish an international hub for manufacturing small, affordable passenger cars and a key center for manufacturing tractors and two-wheelers in the world;
- Ensure a balanced transition to open trade at a minimal risk to the Indian economy and local industry;
- Conduce incessant modernization of the industry and facilitate indigenous design, research and development;
- Assist development of vehicles propelled by alternate energy sources;
- Develop domestic safety and environmental standards at par with international standards, etc.
As a result of all such initiatives, the norms for foreign investment and import of technology into the sector have been progressively liberalised and at present 100% Foreign Direct Investment (FDI) is permissible under automatic route. The industry has attracted an investment of more than Rs. 50,000 crore in 2002-03 which is slated to go upto Rs. 80,000 crore by the year 2007.
These policy measures and incentives together with advantages like low-cost and high-skill manpower; well-developed and globally competitive auto ancillary industry; established automobile testing and R&D centres; production of steel at lowest-cost, etc. provide attractive investment opportunities in the sector.
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